Snapshot
- Total return strategy seeks to access the growth of China with lower volatility
- Unconstrained all-cap portfolio with a quality bias
- Flexible approach offers participation in both growth and value markets
11/30/2009
Inception Date
3.20%
YTD Return
(as of 10/26/2021)
$19.92
Price
(as of 10/26/2021)
$394.48 million
Fund Assets
(as of 09/30/2021)
Objective
Total return with an emphasis on providing current income.
Strategy
Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term.
Risks
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.
The risks associated with investing in the Fund can be found in the prospectus.
Fund Facts
| Inception Date | 11/30/2009 | |
| Fund Assets | $394.48 million (09/30/2021) | |
| Currency | USD | |
| Ticker | MCDFX | |
| Cusip | 577-125-305 | |
| Portfolio Turnover | 81.8% | |
| Benchmark | MSCI China Index | |
| Geographic Focus | China - China includes its administrative and other districts, such as Hong Kong | |
Fees & Expenses
| Gross Expense Ratio | 1.15% | |
Performance
- Monthly
- Quarterly
- Calendar Year
As of 09/30/2021
As of 09/30/2021
For the years ended December 31st
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.
Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.
Growth of a Hypothetical $10,000 Investment Since Inception
(as of 09/30/2021)Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.
Yield
(as of 09/30/2021)
0.72%
30-Day SEC Yield
2.69%
Dividend Yield
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.
Ratings
(as of 09/30/2021)
CATEGORY: China Region
(as of 09/30/2021)
CATEGORY: China Region Funds
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Portfolio Managers
Sherwood Zhang, CFA
Lead Manager
Sherwood Zhang, CFA
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews Asia. He manages the firm's China Dividend Strategy and co-manages the Asia Dividend and Asia ex Japan Dividend Strategies. Prior to joining Matthews Asia in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Yu Zhang, CFA
Co-Manager
Yu Zhang, CFA
Portfolio Manager
Yu Zhang is a Portfolio Manager at Matthews Asia. He manages the firm's Asia Dividend and Asia ex Japan Dividend Strategies, and co-manages the China Dividend Strategy. Prior to joining Matthews Asia in 2007 as a Research Associate, Yu was an Analyst researching Japanese companies at Aperta Asset Management from 2005 to 2007. Before receiving a graduate degree in the U.S., he was an Associate in the Ningbo, China office of Mitsui & Co., a Japanese general trading firm. Yu received a B.A. in English Language from the Beijing Foreign Studies University, an MBA from Suffolk University and an M.S. in Finance from Boston College. He is fluent in Mandarin.
S. Joyce Li, CFA
Co-Manager
S. Joyce Li, CFA
Portfolio Manager
S. Joyce Li is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Dividend Strategy and co-manages the Asia ex Japan Dividend and China Dividend Strategies. Prior to joining the firm in 2016, she was a Portfolio Manager and Principal at Marvin & Palmer Associates, where she co-managed equity investments in the Asia Pacific markets between 2007 and 2016. Joyce started her investment career as a Senior Investment Associate at Wilmington Trust. Joyce received an MBA with honors from the Wharton School of the University of Pennsylvania and a M.S. in Computer Science from the University of Virginia. She is fluent in Mandarin and Cantonese.
Portfolio Characteristics
(as of 09/30/2021)Sources: BNY Mellon Investment Servicing (US) Inc., Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia
Top 10 Holdings
(as of 09/30/2021)Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Portfolio Breakdown (%)
(as of 09/30/2021)- Sector Allocation
- Asset Type Breakdown
- Market Cap Exposure
- China Exposure
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
Source: FactSet Research Systems.
Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.
Distributions
Explore Our China Research and Insights
Visit our Glossary of Terms page for definitions and additional information.
The Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.
The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.
Commentary
Period ended September 30, 2021
For the quarter ending September 30, 2021, the Matthews China Dividend Fund returned -9.20% (Investor Class) and -9.11% (Institutional Class), while its benchmark, the MSCI China Index, returned -18.13%.
Market Environment:
Chinese equities were under extreme pressure during the third quarter, as market participants were shocked by regulatory developments in China around data security and the anti-monopolistic behavior of certain internet companies. These measures were announced soon after the severe measures focused on the after-school tutoring industry at the end of the second quarter. Lackluster consumption growth data and news around the potential for large real estate developer China Evergrande Group to default on its bonds weighed on market sentiment quite negatively as well.
The MSCI China Index, which has significant exposure to the internet sector, was down -18.1% during the quarter. While China’s domestic A-share market performed relatively better, it was also down significantly during the quarter. Market participants were initially quite confused with the Chinese Communist Party’s goal of “common prosperity” as stated by the Party during a high-level official meeting. Government officials and policy experts clarified that “common prosperity” does not mean robbing wealth from the rich but rather enabling people of all backgrounds to have a fair share of success in society. In early September, President Xi Jinping announced that a third stock exchange on mainland China, the “Beijing Stock Exchange,” will be set up to focus on serving small- and medium-size companies. We believe it is a clear signal that the Party is not going to ditch private entrepreneurs. In addition, in September China officially submitted its application to join the CPTPP (the Comprehensive and Progressive Agreement on Trans Pacific Partnership). This is also a clear signal that China wants to continue to remain open to global trade and investment while maintaining the pace of economic reform.
Performance Contributors and Detractors:
China Suntien Green Energy, a natural gas utility company with significant exposure in alternative energy, was the top contributor to Fund performance during the third quarter. Market participants were excited about the possibility that rising coal prices could lead to higher electricity prices and higher emission standards could raise natural gas demand by industrial companies in Hebei province, where Suntien operates its pipeline. Given that the share price doubled during a single quarter, we have taken some profit and trimmed the position. Shanghai Baosight Software, an industrial software developer and data center operator, reported 50% earnings growth for the second quarter, helping to make it the second largest contributor to absolute Fund performance during the quarter. Kunlun Energy, another gas utility company, is the third largest performance contributor, as it completed the divestment of a gas pipeline and paid out a significant share of the proceeds to shareholders via a special dividend.
On the contrary, Shimao Services Holdings, a property management company which performed well for the first half of the year, was the largest absolute performance detractor for the quarter. Weighing on Shimao’s stock price were concerns about whether China Evergrande Group’s financial distress could spread to the entire real estate industry in China, and potentially cause a significant slowdown of the property management industry’s growth as well. We share those concerns, but still believe the property management industry is much more focused on the existing housing stock with recurrent revenue income, rather than “lumpy” property sales. In addition, the financial position of the property management industry is also much stronger than property developers. For now, we continue to like Shimao Service’s focus on high end residential properties, with expanding service into commercial and public institutions. Two internet giants, Tencent Holdings and Alibaba Group, were the second and third largest absolute performance detractors during the quarter as their share prices were hammered due to regulatory concerns.
Notable Portfolio Changes:
During the third quarter, we re-initiated a position in Hainan Meilan International Airport. After the airport’s parent company, the HNA Group, declared bankruptcy earlier this year, the restructuring of HNA’s assets is in our view likely to result in the Hainan provincial government taking control of the infrastructure assets, which could be beneficial for Hainan Meilan to improve financials and consolidate other airport assets on the island province. We are also hopeful that the company will benefit from the re-opening of domestic and international travel. Another portfolio addition was China Jushi, a leading manufacturer of glass fiber, which is increasingly used in many sectors such as wind power turbines, electric vehicles and construction. Jushi is already the largest glass fiber manufacturer in China, and with its U.S. plant is ramping up this year, could benefit from potential infrastructure stimulus programs in the U.S.
We have exited the positions of Topsports International and New China Life, as we think these two companies are increasingly facing strong structural challenges to grow their revenue and earnings, thus we decided to redeploy capital elsewhere. In addition, we have exited three ADRs (American Depository Receipts), namely Miniso Group Holdings, Kanzhun and Full Truck Alliance, as ADR issuers are facing increasing regulatory risks from both the U.S. and China—data security demands from China and delisting threats from the U.S. We think it is sensible to allocate capital accordingly.
Outlook:
The structural consumption growth trend in China faces a temporary slowdown in 2021 in our view, caused by weak consumer sentiment and strict government measures seeking to stop the spread of COVID-19 variants. Meanwhile, the ongoing manufacturing and industrial up-cycles moderated recently on challenges from raw material cost inflation and supply chain shortages. We believe China’s equity markets have largely priced in a rising inflation expectation and near-term growth moderation. Looking ahead, we remain constructive on Chinese equities, anticipating a positive inflection point in monetary and fiscal policies in China to support its domestic economy.
As of September 30, 2021, the securities mentioned comprised the Matthews China Dividend Fund in the following percentages: China Suntien Green Energy Corp., 6.2%; Shanghai Baosight Software Co., 4.2%; Kunlun Energy Co., 2.0%; Shimao Services Holdings, 2.7%; Tencent Holdings, 6.2%; Alibaba Group Holding, 1.9%; Hainan Meilan International Airport Co., 2.0%; and China Jushi Co., 1.4%.
The Fund held no positions in China Evergrande Group, Topsports International, New China Life, Miniso Group Holdings, Kanzhun, and Full Truck Alliance.
Current and future portfolio holdings are subject to change and risk. There is no guarantee that a company will pay or continue to increase dividends.
Earnings growth is not representative of the fund’s future performance.
Average Annual Total Returns - MCDFX as of 09/30/2021
All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.
Fees & Expenses
Yields as of 09/30/2021
The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 09/30/2021, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.
Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.
There is no guarantee that a company will pay or continue to increase dividends. Past performance is no guarantee of future results.